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Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
Determining the ROI for Safety
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Determining the ROI for Safety

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  • 1. Determining the ROI for Safety JB Titus, CFSE President JB TITUS & ASSOCIATES
  • 2. Agenda <ul><li>Introduction </li></ul><ul><li>Current machine safety situation </li></ul><ul><li>Brief history / evolution of functional safety </li></ul><ul><li>Research overview & conclusions </li></ul><ul><li>The new “ROI Tool” basics </li></ul><ul><li>Live demo </li></ul><ul><li>Q & A </li></ul>Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 3. Customer Feedback <ul><li>Customers are asking for help in determining their ROI for capital projects with integrated safety systems that can: </li></ul><ul><li>Reduce injury related costs </li></ul><ul><li>Improve productivity </li></ul><ul><li>Improve operational costs </li></ul><ul><li>and…… </li></ul>Improve their competitive advantage Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 4. Machine Safety – current situation <ul><li>Machine Safety is becoming a core function delivering significant business & economic value: </li></ul><ul><ul><ul><ul><ul><li>Boosting productivity </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>And, the bottom line </li></ul></ul></ul></ul></ul>Nearly ten years of application success stories Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 5. Evolution / History <ul><li>In 2002, NFPA 79, Electrical Standard for Industrial Machinery, changed – allowing safety automation in domestic manufacturing. </li></ul><ul><ul><li>Hardwiring safety components was no longer the only solution </li></ul></ul><ul><ul><li>The door opened for new safety certified automation products : </li></ul></ul>Safety PLC’s, Safe Drives, Safe Motion, Safety Field Bus, etc. Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 6. Evolution – adoption & challenges Determining economic value ? Challenges Risk Assessments, New Technologies, New Standards, New Practices, OSHA, Change 2002 Present Copyright © 2011 Rockwell Automation, Inc. All rights reserved Adopters Four Stages of Adoption Market Wide Adoption
  • 7. Evolution / History – a concept Technology & Reliability Time 1970 2002 General Automation Technology Machine Safety Technology Unplanned Downtime Integrated Automation With Safety “ The Machine Safety Technology Landscape” Confidential Property of JB TITUS & ASSOCIATES Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 8. Evolution / History – new influences <ul><li>Updated safety standards </li></ul><ul><li>Emerging Business Initiatives </li></ul><ul><ul><li>OEE (Overall Equipment Effectiveness) </li></ul></ul><ul><ul><ul><li>Availability, Performance, Quality </li></ul></ul></ul>(2002 to Present) Impacting Your Safety Culture Copyright © 2011 Rockwell Automation, Inc. All rights reserved NFPA 79 RIA 15.06 15.06 IEC 61508 ANSI B11.0 ISO 10218-1 & 2 IEC 62061 ANSI B11.1 S - 2 EN ISO 13849-1 ANSI B11.19 ISO 12100 IEC 60204-1
  • 9. Evolution / History – today <ul><li>Safety integrated vs hardwired </li></ul><ul><li>Integrated components / functions </li></ul><ul><li>Integrated diagnostics </li></ul><ul><li>Safety field bus </li></ul><ul><li>Safe motion </li></ul><ul><li>Safety sensors </li></ul><ul><li>Safety I/O </li></ul>Machine Safety can reduce injuries & increase productivity --- Improved Bottom Line --- Integrated Safety Solutions = Cost Savings The Value Proposition Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 10. Customer Testimonials <ul><li>“ There’s not a day that goes by that I don’t equate a savings in some shape or form with our safety systems!”, Mike Douglas, Sr. Manager & Consultant Global Health & Safety, Design, Standards & Technology </li></ul><ul><li>“ A historical lack of accidents does not imply a current presence of safety. It simply means you’ve been faster than the machine .”, Bill Hilton, Director of Health and Safety </li></ul><ul><li>“ We took an order in May for a new machine, and we were able to deliver it by the middle of September – half the time it previously took .”, Thomas Butler, Managing Director, T. Butler Engineering </li></ul><ul><li>“ Thanks to Rockwell Automation Integrated Architecture, we only require one supplier .”, Roggero Magagni, Commercial Manager, Barilla Ivano Ondenei, Software Engineer, Barilla </li></ul>Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 11. A New ROI Tool – addressing economic value <ul><li>Existing ROI Tools do not exist for integrated safety solutions </li></ul><ul><ul><li>Injury related costs, or productivity impacts </li></ul></ul><ul><li>A new comprehensive tool is needed: </li></ul><ul><ul><li>It must be flexible and easy to use </li></ul></ul><ul><ul><li>It must address the value proposition of “Integrated Safety Solutions” </li></ul></ul><ul><ul><ul><li>Combining both injury & productivity data </li></ul></ul></ul><ul><ul><li>It needs to address the EH&S concern for injury data </li></ul></ul><ul><ul><li>It needs to provide a credible result </li></ul></ul>The ROI Tool – Way Forward ROI = Benefits ÷ Costs = % (Annualized) Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 12. ROI Tool – injury data research <ul><ul><li>http://www.osha.gov/OshDoc/data_General_Facts/jobsafetyandhealth-factsheet.pdf </li></ul></ul><ul><ul><li>Why should everyone be concerned about job safety and health? </li></ul></ul><ul><ul><ul><li>Each year, approximately 6,000 employee deaths in industry </li></ul></ul></ul><ul><ul><ul><li>Another 50,000 die from illnesses caused by exposure to workplace hazards </li></ul></ul></ul><ul><ul><ul><li>Approximately 6 million workers suffer non-fatal workplace injuries </li></ul></ul></ul><ul><ul><ul><li>The annual cost to U.S. businesses of more than $125 billion </li></ul></ul></ul>Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 13. ROI Tool – injury data research <ul><li>Research example sites: </li></ul><ul><li>White papers, articles, etc. </li></ul><ul><ul><li>“ Accident Costs (Rethinking ratios of indirect to direct costs)” – by Fred A. Manuele </li></ul></ul><ul><ul><li>“ A zero accident culture can impact profit margins”, Zurich Insurance </li></ul></ul><ul><ul><li>“ 2010 Liberty Mutual Workplace Safety Index”, Liberty Mutual Research Institute For Safety </li></ul></ul><ul><li>Workers Compensation </li></ul><ul><ul><li>State specific </li></ul></ul><ul><ul><li>Injury categories </li></ul></ul><ul><ul><li>Company accident history </li></ul></ul><ul><li>Interviews </li></ul>Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 14. ROI Tool – injury data research <ul><li>OSHA – Bureau of Labor and Statistics http://www.bls.gov/iif/oshwc/osh/os/ostb2435.pdf </li></ul><ul><ul><li>Table 1. Incidence rates 1 of nonfatal occupational injuries and illnesses </li></ul></ul><ul><ul><li>by industry and case types, 2009 </li></ul></ul><ul><ul><li>34 pages of industries </li></ul></ul>Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 15. ROI Tool –injury data research <ul><li>BLS (Injuries, Illnesses, and Fatalities) http://www.bls.gov/iif/oshsum.htm </li></ul><ul><ul><li>Accumulated industry data since 1994 </li></ul></ul><ul><ul><li>Everything…..a wealth of information </li></ul></ul>Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 16. ROI Tool – injury data research <ul><li>Some web based tools: </li></ul><ul><ul><li>National Security Council - http://www.nsc.org/news_resources/injury_and_death_statistics/Pages/EstimatingtheCostsofUnintentionalInjuries.aspx </li></ul></ul><ul><ul><li>OSHA Stats & Data - http://www.osha.gov/oshstats/index.html </li></ul></ul><ul><ul><li>Injury Cost Calculator - http://www.safetymanagementgroup.com/injury-cost-calculator.aspx </li></ul></ul><ul><ul><li>Utah Safety Council - http://www.utahsafetycouncil.org/content.asp?id=201 </li></ul></ul><ul><ul><li>OSHA Fact Sheet - http://www.osha.gov/OshDoc/data_General_Facts/jobsafetyandhealth-factsheet.pdf </li></ul></ul><ul><ul><li>OSHA incident rate calculator - http://www.safetymanagementgroup.com/osha-incident-rate-calculator.aspx </li></ul></ul><ul><ul><li>ATI (ROI Calculator) - http://www.automatedtestinginstitute.com/home/index.php?option=com_content&view=article&id=58&Itemid=65 </li></ul></ul><ul><ul><li>National Council on Compensation Research - https://www.ncci.com/NCCIMain/Pages/Default.aspx </li></ul></ul>Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 17. ROI Tool –injury data research summary Research revealed a Ratio “Range” of 2 : 1 to 14 : 1 Indirect Costs vs Direct Costs Copyright © 2011 Rockwell Automation, Inc. All rights reserved Indirect Costs Direct Costs <ul><li>Lost productivity </li></ul><ul><li>Medical expenses </li></ul><ul><li>OSHA fines </li></ul><ul><li>Rehabilitation expenses </li></ul><ul><li>Repairs to property </li></ul><ul><li>Wages to workers </li></ul><ul><li>Temporary employees </li></ul><ul><li>Worker’s Compensation </li></ul><ul><li>Accident investigation </li></ul><ul><li>Insurance/legal expenses </li></ul><ul><li>Corrective action </li></ul>
  • 18. ROI Tool – injury data research results <ul><li>The new ROI Tool will: </li></ul><ul><ul><li>Provide a default ratio of 2 : 1 </li></ul></ul><ul><ul><li>Provide a user selectable ratio from 1 : 1 to 14 : 1 </li></ul></ul><ul><ul><li>Consider reducing Indirect and Direct Injury Costs as benefits </li></ul></ul><ul><ul><li>Allow zero (0) entries for both Indirect and Direct Injury Costs </li></ul></ul>Indirect Costs vs Direct Costs Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 19. ROI Tool – productivity data research <ul><li>Influence - Safety standards allow safety automation products (“listed for such use”) to be used for safety-related functions since 2002. </li></ul><ul><li>White papers, case studies, & interviews </li></ul><ul><ul><li>Example result - Using GuardLogix controllers instead of traditional safety relays helped GM greatly reduce installation and debug times for new body-shop equipment. Previously, wiring for a typical five-robot cell required 640 wires/cables; with the GuardLogix system, the wiring was reduced to a five-wire cable. Furthermore, the plug-and-play functionality and debug features reduced installation and maintenance time and costs. “GM’s Road To Safe Manufacturing”” </li></ul></ul><ul><li>Business metrics – can Overall Equipment Effectiveness (OEE) be applied? </li></ul>Economic Value & Integrated Safety Solutions Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 20. ROI Tool – productivity data research <ul><li>OEE is an innovative method to measure productivity performance. More specifically, it is a statistical metric to determine how efficient a machine is running. </li></ul><ul><li>OEE is calculated by multiplying together: </li></ul><ul><ul><ul><li>Availability x Performance x Quality = OEE </li></ul></ul></ul><ul><li>The combination is the value a machine contributes to the production process. </li></ul>What is OEE? Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 21. ROI Tool – productivity data research <ul><li>Availability = ( Planned Production Time – Unplanned Downtime) </li></ul><ul><li>(Planned Production Time) </li></ul><ul><li>Performance = (Cycle Time x Number of Products Processed) </li></ul><ul><li>(Production Time) </li></ul><ul><li>Quality = (Number of Products Made – Number of Products Rejected) </li></ul><ul><li>(Number of Products Made) </li></ul>What is OEE? Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 22. ROI Tool – productivity data research <ul><li>OEE is calculated by multiplying together: </li></ul><ul><ul><ul><li>Availability x Performance x Quality = OEE </li></ul></ul></ul><ul><li>Example - 90% x 95% x 99.5% = 85.1% OEE </li></ul><ul><li>So what? </li></ul><ul><ul><li>A recent Aberdeen Group study surveyed 236 manufacturing executives </li></ul></ul><ul><ul><ul><li>Best-in class had 4% </li></ul></ul></ul><ul><ul><ul><li>less unscheduled </li></ul></ul></ul><ul><ul><ul><li>downtime. </li></ul></ul></ul><ul><ul><ul><li>Industry average </li></ul></ul></ul><ul><ul><ul><li>Laggard </li></ul></ul></ul>What is OEE? Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 23. ROI Tool – productivity data research <ul><li>Availability - Goal is to demonstrate that “integrated safety solutions” can reduce unscheduled downtime of a machine. This reduction can then be calculated into “unscheduled downtime savings” via the following variables: </li></ul><ul><ul><li>Unscheduled Downtime per Week in minutes </li></ul></ul><ul><ul><li>Operations Cost of Downtime per minute(not including lost production) </li></ul></ul><ul><ul><li>Weeks of Unscheduled Downtime per year </li></ul></ul><ul><ul><li>Reduction Factor of all unscheduled downtime that is attributable to the proposed integrated safety solution. A default of 4% is built into the calculation (Aberdeen Group Study). </li></ul></ul><ul><ul><li>Note - Unscheduled downtime is caused by several factors such as; mechanical and &quot;other&quot; breakdowns, material shortages, scheduling issues, intermittent connections, miss-feeds, jams, operator or maintenance mistakes, etc. </li></ul></ul>Translating OEE to the Balance Sheet Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 24. ROI Tool – productivity data research <ul><li>Performance - Goal is to demonstrate that the “integrated safety solution” can improve the production levels of a machine by driving more machine &quot;up time&quot; and/or greater cycles per period (hour, shift, day, week, etc.). This increase in production can then be calculated into “increased profit” to the bottom line via the following variables: </li></ul><ul><ul><li>Increased Units Produced per Week </li></ul></ul><ul><ul><li>Scheduled Production Weeks per year </li></ul></ul><ul><ul><li>Profit Contribution dollars per unit </li></ul></ul>Translating OEE to the Balance Sheet Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 25. ROI Tool – productivity data research <ul><li>Quality – Our research thus far has not supported a definitive relationship to first run quality produced parts as relates to the “integrated safety solution”. Therefore, we have not included any developed algorithms that would equate a quality impact to a company's balance sheet that directly relates to an “integrated safety solution” investment. </li></ul><ul><li>We are considering an updated ROI Tool revision that could address improved quality and the related improvements to the bottom line. </li></ul>Translating OEE to the Balance Sheet Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 26. ROI Tool – capital investments & depreciation <ul><li>Capital Investment – the “integrated safety solution” investment can drive a new depreciation schedule </li></ul><ul><ul><li>Complete machine control & functional safety system upgrade </li></ul></ul><ul><ul><li>Functional safety system upgrade </li></ul></ul><ul><li>Applying Depreciation </li></ul><ul><ul><li>An expense write-off </li></ul></ul><ul><ul><li>An investment benefit </li></ul></ul>Depreciation’s impact to the Balance Sheet Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 27. ROI Tool – productivity data research results <ul><li>The new ROI Tool will: </li></ul><ul><ul><li>Provide fields for entering project related data as prompted </li></ul></ul><ul><ul><li>Provide a default reduction factor of 4% for reduced unscheduled downtime with user input capability </li></ul></ul><ul><ul><li>Provide a depreciation default of 10 years with user input capability </li></ul></ul><ul><ul><li>Allow zero (0) entries as needed for any user </li></ul></ul>Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 28. ROI Tool – project cost <ul><li>Integrated Safety System - scope of supply </li></ul><ul><ul><li>Controls, software, field devices, cabinets, installation, training, etc. </li></ul></ul>Integrated Safety Systems are proven to improve productivity, safety & the bottom line Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 29. ROI Tool - basics <ul><li>ROI Tool Development Objectives: </li></ul><ul><li>Introduce a simple but comprehensive algorithm with expansion capability </li></ul><ul><li>Results need to be credible </li></ul><ul><li>Provide web based access </li></ul><ul><li>Provide an off-line work sheet </li></ul><ul><li>Typical users: </li></ul><ul><ul><li>EH&S executives & staff </li></ul></ul><ul><ul><li>Operational management </li></ul></ul><ul><ul><li>Safety engineers </li></ul></ul><ul><ul><li>Project engineers </li></ul></ul>Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 30. ROI Tool – basics “work sheet” Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 31. RA Safety Portal – landing page Copyright © 2011 Rockwell Automation, Inc. All rights reserved http://discover.rockwellautomation.com/safety
  • 32. ROI Tool Summary <ul><li>A new comprehensive ROI tool is here: </li></ul><ul><li>It is flexible and easy to access on the web </li></ul><ul><li>It is easy to use and an off-line work sheet is provided </li></ul><ul><ul><li>It addresses the value proposition of “Integrated Safety Solutions” </li></ul></ul><ul><ul><li>It addresses the EH&S concern for injury data </li></ul></ul><ul><ul><li>It applies to all industry segments </li></ul></ul><ul><ul><li>It provides a credible result by combining injury data & productivity data in one tool </li></ul></ul>Customers can now determine their ROI for capital projects with integrated safety systems Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 33. Questions ?
  • 34. Thank You! JB Titus, CFSE President JB TITUS & ASSOCIATES

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